SECURITIES AND EXCHANGE BOARD OF INDIA (REAL ESTATE INVESTMENT TRUSTS) REGULATIONS, 2014

Transcription

1 THE GAZETTE OF INDIA EXTRAORDINARY PART III SECTION 4 PUBLISHED BY AUTHORITY NEW DELHI, SEPTEMBER 26, 2014 SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 26th of September, 2014 SECURITIES AND EXCHANGE BOARD OF INDIA (REAL ESTATE INVESTMENT TRUSTS) REGULATIONS, 2014 No. LAD-NRO/GN/ /11/ In exercise of the powers conferred by section 30 read with section 11 and 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), laying down a framework for Real Estate Investment Trusts and registration and regulation thereof, the Securities and Exchange Board of India hereby, makes the following regulations, namely, CHAPTER I PRELIMINARY Short title and commencement. 1. (1) These regulations may be called the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations, (2) They shall come into force on the date of their notification in the Official Gazette. Definitions. 2. (1) In these regulations, unless the context otherwise requires, the terms defined herein shall bear the meanings assigned to them below, and their cognate expressions shall be construed accordingly, (a) Act means the Securities and Exchange Board of India Act, 1992 (15 of 1992); 1

2 (b) associate of any person includes,- (i) any person controlled, directly or indirectly, by the said person; (ii) any person who controls, directly or indirectly, the said person; (iii) where the said person is a company or a body corporate, any person(s) who is designated as promoter(s) of the company or body corporate and any other company or body corporate with the same promoter(s); (iv) where the said person is an individual, any relative of the individual; (v) where the said person is a company or a body corporate or an LLP, its group companies; (vi) companies or LLPs under the same management; (vii) where the said person is a REIT, related parties to the REIT; (viii) any company or LLP or body corporate in which the person or its director(s) or partner(s) hold(s), either individually or collectively, more than fifteen percent of its paid-up equity share capital or partnership interest, as the case may be; (c) "Board" means the Securities and Exchange Board of India established under section 3 of the Act; (d) body corporate shall have the meaning assigned to it in or under sub-section (11) of section 2 of the Companies Act, 2013; (e) bonus issue means additional units allotted to the unit holders as on the record date fixed for the said purpose, without any cost to the unit holder; (f) certificate means a certificate of registration granted under these regulations; (g) "change in control" means,- (i) in case of a company or body corporate, change in control where 'control' shall have the meaning as provided in sub-section (27) of section 2 of the Companies Act, 2013; (ii) in any other case, change in the controlling interest; 2

3 Explanation. For the purpose of sub-clause (ii), the expression controlling interest means an interest, whether direct or indirect, to the extent of more than fifty percent of voting rights or interest; (h) company means a company as defined under sub-section (20) of section 2 of the Companies Act, 2013; (i) completed property means property for which occupancy certificate has been received from the relevant authority; (j) credit rating agency means a credit rating agency registered with the Board under the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999; (k) custodian means a person registered with the Board under the Securities and Exchange Board of India (Custodian of Securities) Regulations, 1996; (l) designated stock exchange means a recognised stock exchange in which units of a REIT are listed or proposed to be listed and which is chosen by the REIT as a designated stock exchange for the purpose of a particular issue of the units of the REIT under these regulations: Provided that where one or more of such stock exchanges have nationwide trading terminals, the REIT shall choose one of them as the designated stock exchange: Provided further that subject to the provisions of this clause, the REIT may choose a different recognised stock exchange as a designated stock exchange for any subsequent issue of units of the REIT under these regulations; (m)"floor space index" or "FSI" shall mean the buildable area on a plot of land as specified by the competant authority; (n) follow on offer means offer of units of a listed REIT to the public for subscription and includes an offer for sale of REIT units by an existing unit holder to the public; (o) follow-on offer document means any document by which follow-on offer is made to the public; (p) form means any of the forms set out in the Schedule I of these regulations; (q) "governing board in case of an LLP shall mean a group of members assigned by the LLP to act in a manner similar to the Board of directors in case of a company; initial 3

4 offer means the first offer of units of an REIT to the public for subscription and includes an offer for sale of REIT units by an existing unit holder to the public; (r) initial offer document means any documentby which initial offer is made to the public by the REIT; (s) inspecting officer means any one or more person appointed by the Board to exercise powers conferred under Chapter VII of these regulations; (t) investment management agreement means an agreement between the trustee and the manager which lays down the roles and responsibilities of the manager towards the REIT; (u) listed REIT means a REIT whose units are listed on a recognized stock exchange; (v) "LLP" means a limited liability partnership as defined under the Limited Liability Partnership Act, 2008; (w) manager means a company or LLP or body corporate incorporated in India which manages assets and investments of the REIT and undertakes operational activities of the REIT; (x) "net asset value or "NAV" means the value of the REIT divided by the number of outstanding units as on a particular date; (y) net worth in relation to a company or a body corporate shall have the meaning assigned to it under sub-section (57) of section 2 of the Companies Act, 2013; (za) occupancy certificate means a completion certificate, or such other certificate, as the case may be, issued by the competent authority permitting occupation of any property under any law for the time being in force; (zb) "offer document" means any document described or issued as an offer document including any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of units of the REIT and includes initial offer document, follow-on offer document and any other document as may be specified by the Board; (zc) parties to the REIT shall include the sponsor(s), re-designated sponsor(s), manager, and trustee; 4

5 (zd) preferential issue means an issue of units by a listed REIT to any select person or group of persons on a private placement basis and does not include an offer of units made through a public issue, rights issue, bonus issue, qualified institutions placement or any other issue as may be specified by the Board; (ze) public for the purposes of offer and listing of units means any person other than related party of the REIT or any other person as may be specified by the Board: Provided that in case any related party to the REIT is a qualified institutional buyer, such person shall be included under the term 'public'; (zf) public issue means an initial offer or follow-on offer or any other issue made to the public as may be specified by the Board; (zg) qualified institutional buyer shall have the meaning assigned to it under clause (zd) of sub-regulation (1) of regulation 2 of the SEBI (Issue Of Capital And Disclosure Requirements) Regulations, 2009; (zh) qualified institutions placement means allotment of units by a listed REIT to qualified institutional buyers on private placement basis in terms of these regulations; (zi) real estate or property means land and any permanently attached improvements to it, whether leasehold or freehold and includes buildings, sheds, garages, fences, fittings, fixtures, warehouses, car parks, etc. and any other assets incidental to the ownership of real estate but does not include mortgage: Provided that any asset falling under the purview of 'infrastructure' as defined vide Notification of Ministry of Finance dated October 07, 2013 including any amendments or additions made thereof shall not be considered as 'real estate' or 'property' for the purpose of these regulations; (zj) real estate assets means properties owned by REIT whether directly or through a special purpose vehicle; (zk) recognised stock exchange means any stock exchange which is recognised under section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (zl) "re-designated sponsor" means any person who has assumed the responsibility of the sponsor as provided under regulation 11 from the person as designated under clause (zt) of sub-regulation (1) of this regulation or from any re-designated sponsor thereafter; 5

6 (zm) REIT or "Real Estate Investment Trust" shall mean a trust registered as such under these regulations; (zn) REIT assets means real estate assets and any other assets owned by the REIT whether directly or through a special purpose vehicle; (zo) related party to the REIT shall include: (i) parties to the REIT; (ii) any unit holder holding, directly or indirectly, more than twenty per cent. of the units of the REIT; (iii) associates, sponsors, directors and partners of the persons in clause (i) and (ii); (zp) "rent generating property" means property which has been leased or rented out in accordance with an agreement entered into for the purpose; (zq) rights issue means an offer of units by a listed REIT to the unit holders of the REIT as on the record date fixed for the said purpose; (zr) right-of-first-refusal or "ROFR" of a REIT means the right given to the REIT by a person to enter into a transaction with it before the person is entitled to enter that transaction with any other party; (zs) "special purpose vehicle" or "SPV" means any company or LLP, - (i) in which the REIT holds or proposes to hold controlling interest and not less than fifty per cent. of the equity share capital or interest; (ii) which holds not less than eighty per cent. of its assets directly in properties and does not invest in other special purpose vehicles; and (iii) which is not engaged in any activity other than holding and developing property and any other activity incidental to such holding or development; (zt) sponsor means any person(s) who set(s) up the REIT and designated as such at the time of application made to the Board; (zu) "transferable development rights" or "TDR" shall mean development rights issued by the competent authority under relevant laws in lieu of the area relinquished or surrendered by the owner or developer or by way of declared incentives by the government or authority; 6

7 (zv) trustee means a person who holds the REIT assets in trust for the benefit of the unit holders, in accordance with these regulations; (zw) under-construction property means a property of which construction is not complete and occupancy certificate has not been received; (zx) unit means beneficial interest of the REIT; (zy) unit holder means any person who owns units of the REIT; (zz) valuer means any person who is a "registered valuer" under section 247 of the Companies Act, 2013 and who has been appointed by the manager to undertake valuation of the REIT assets: Provided that till such date on which section 247 of the Companies Act, 2013 comes into force, valuer shall mean an independent merchant banker registered with the Board or an independent chartered accountant in practice having a minimum experience of ten years; (zza) "value of the REIT" means value of the REIT as certified by the auditor based on the value of REIT assets held directly or through the SPV excluding any debt or liabilities thereof; (zzb) "value of the REIT assets" means aggregate value of all the assets under the REIT as assessed by the valuer. (2) The words and expressions used and not defined in these regulations, but defined in the Act, the Securities Contracts (Regulation) Act, 1956, (42 of 1956), the Companies Act, 2013 (18 of 2013), or any rules or regulations made thereunder, shall have the same meanings respectively assigned to them in those Acts, rules or regulations, or any statutory modification or re-enactment thereto, as the case may be. 7

8 CHAPTER II REGISTRATION OF REAL ESTATE INVESTMENT TRUSTS Registration of real estate investment trusts. 3. (1) No person shall act as a REIT unless it is registered with the Board under these regulations. (2) An application for grant of certificate of registration as REIT shall be made, by the sponsor in Form A as specified in the Schedule I to these regulations and shall be accompanied by a non-refundable application fee of such amount and shall be payable in the manner as specified in Schedule II to these regulations. (3) The Board may, in order to protect the interests of investors, appoint any person to take charge of records, documents of the applicant and for this purpose, also determine the terms and conditions of such an appointment. (4) The Board shall take into account requirements as specified in these regulations for the purpose of considering grant of registration. Eligibility criteria. 4. (1) For the purpose of the grant of certificate to an applicant, the Board shall consider all matters relevant to the activities as a REIT. (2) Without prejudice to the generality of the foregoing provision, the Board shall consider the following, namely, - (a) the applicant is a trust and the instrument of trust is in the form of a deed duly registered in India under the provisions of the Registration Act, 1908; (b) the trust deed has its main objective as undertaking activity of REIT in accordance with these regulations and includes responsibilities of the Trustee in accordance with regulation 9; (c) persons have been designated as sponsor(s), manager and trustee under these regulations and all such persons are separate entities; (d) with regard to sponsor(s),- 8

9 (i) there are not more than three sponsors each holding or proposing to hold not less than five per cent. of the number of units of the REIT on post-initial offer basis; (ii) the sponsor(s), on a collective basis, have a net worth of not less than one hundred crore rupees: Provided that each sponsor has a net worth of not less than twenty crore rupees; and (iii) the sponsor or its associate(s) has not less than five years experience in development of real estate or fund management in the real estate industry: Provided that where the sponsor is a developer, at least two projects of the sponsor have been completed; (e) with regard to the manager,- (i) the manager has a net worth of not less than ten crore rupees if the manager is a body corporate or a company or net tangible assets of value not less than ten crore rupees in case the manager is a LLP; (ii) the manager or its associate has not less than five years experience in fund management or advisory services or property management in the real estate industry or in development of real estate; (iii)the manager has not less than two key personnel who each have not less than five years experience in fund management or advisory services or property management in the real estate industry or in development of real estate; (iv) the manager has not less than half, of its directors in the case of a company or of members of the governing Board in case of an LLP, as independent and not directors or members of the governing Board of another REIT; and (v) the manager has entered into an investment management agreement with the trustee which provides for the responsibilities of the manager in accordance with regulation 10; (f) with regard to the trustee,- (i) the trustee is registered with the Board under SEBI(Debenture Trustees) Regulations, 1993 and is not an associate of the sponsor(s) or manager; and 9

10 (ii) the trustee has such wherewithal with respect to infrastructure, personnel, etc. to the satisfaction of the Board and in accordance with circulars or guidelines as may be specified by the Board; (g) no unit holder of the REIT enjoys preferential voting or any other rights over another unit holder; (h) there are no multiple classes of units of REIT; (i) the applicant has clearly described at the time of application for registration, details pertaining to proposed activities of the REIT; (j) the applicant and parties to the REIT are fit and proper persons based on the criteria as specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008; (k) whether any previous application for grant of certificate by the applicant or any related party has been rejected by the Board; (l) whether any disciplinary action has been taken by the Board or any other regulatory authority against the applicant or any related party under any Act or the regulations or circulars or guidelines made thereunder. Furnishing of further information, clarification and personal representation. 5. (1) The Board may require the applicant to furnish any such information or clarification as may be required by it for the purpose of processing of the application. (2) The Board, if it so desires, may require the applicant or any authorized representative to appear before the Board for personal representation in connection with the grant of certificate. Procedure for grant of certificate. 6. (1) The Board on being satisfied that the applicant fulfils, the requirements specified in regulation 4 shall send intimation to the applicant and on receipt of the payment of registration fees as specified in Schedule II, grant certificate of registration in Form B under Schedule I. 10

11 (2) The registration may be granted with such conditions as may be deemed appropriate by the Board. Conditions of certificate. 7. The certificate granted under regulation 6 shall, inter-alia, be subject to the following conditions, namely,- (a) the REIT shall abide by the provisions of the Act and these regulations; (b) the REIT shall forthwith inform the Board in writing, if any information or particulars previously submitted to the Board are found to be false or misleading in any material particular or if there is any material change in the information already submitted; (c) the REIT and parties to the REIT shall satisfy with the conditions specified in regulation 4 at all times; (d) the REIT and parties to the REIT shall comply, at all times, with the Code of conduct as specified in the Schedule VI, wherever applicable. Procedure where registration is refused. 8. (1) After considering an application made under regulation 3, if the Board is of the opinion that a certificate should not be granted to the applicant, it may reject the application after giving the applicant a reasonable opportunity of being heard. (2) The decision of the Board to reject the application shall be communicated to the applicant within thirty days of such decision. CHAPTER III RIGHTS AND RESPONSIBILITIES OF PARTIES TO THE REIT, VALUER AND AUDITOR Rights and responsibilities of trustee. 9. (1) The trustee shall hold the REIT assets in trust for the benefit of the unit holders in accordance with the trust deed and these regulations. 11

12 (2) The Trustee shall enter into an investment management agreement with the manager on behalf of the REIT. (3) The trustee shall oversee activities of the manager in the interest of the unit holders, ensure that the manager complies with regulation 10 and shall obtain compliance certificate from the manager in the form as may be specified on a quarterly basis. (4) The trustee shall ensure that the manager complies with the reporting and disclosures requirements in these regulations and in case of any delay or discrepancy, require the manager to rectify the same on an urgent basis. (5) The trustee shall review the transactions carried out between the manager and its associates and where the manager has advised that there may be a conflict of interest, shall obtain confirmation from a practising chartered accountant that such transaction is on arm's length basis. (6) The trustee shall periodically review the status of unit holders' complaints and their redressal undertaken by the manager. (7) The trustee shall make distributions in accordance with sub-regulation (16) of regulation 18 and ensure that the manager makes timely declaration of distributions to the unit holders. (8) The trustee may require the manager to set up such systems and submit such reports to the trustees, as may be necessary for effective monitoring of the performance and functioning of the REIT. (9) The trustee shall ensure that subscription amount is kept in a separate bank account in name of the REIT and is only utilized for adjustment against allotment of units or refund of money to the applicants till the time such units are listed. (10) The trustee shall ensure that the remuneration of the valuer is not linked to or based on the value of the asset being valued. (11) The trustee shall ensure that the manager convenes meetings of the unit holders in accordance with these regulations and oversee the voting by unitholders and declare outcome of the voting. (12) The trustee may take up with the Board or with the designated stock exchange, any matter which has been approved in an annual meeting or special meeting, if the matter requires such action. 12

13 (13) In case of any change in manager due to removal or otherwise,- (a) prior to such change, the trustee shall obtain approval from unit holders in accordance with regulation 22 and approval from the Board; (b) the trustee shall appoint the new manager within three months from the date of termination of the earlier investment management agreement; (c) the previous manager shall continue to act as such at the discretion of trustee till such time as new manager is appointed; (d) the trustee shall ensure that the new manager shall stand substituted as a party in all the documents to which the earlier manager was a party; (e) the trustee shall ensure that the earlier manager continues to be liable for all its acts of omissions and commissions notwithstanding such termination. (14) The trustee shall obtain prior approval from the unit holders in accordance with regulation 22 and from the Board in case of change in control of the manager. (15) The trustee and its associates shall not invest in units of the REIT in which it is designated as the trustee. (16) The trustee shall ensure that the activity of the REIT is being operated in accordance with the provisions of the trust deed, these regulations, the offer document and if any discrepancy is noticed, shall inform the same to the Board immediately in writing. (17) The trustee shall provide to the Board and to the designated stock exchange such information as may be sought by the Board or by the designated stock exchange pertaining to the activity of the REIT. (18) The trustee shall immediately inform to the Board in case any act which is detrimental to the interest of the unit holders is noted. Rights and responsibilities of manager. 10. (1) The manager shall make the investment decisions with respect to the underlying assets of the REIT including any further investment or divestment of the assets. (2) The manager shall ensure that the real estate assets of the REIT or SPV have proper legal and marketable titles and that all the material contracts including rental or lease agreements 13

14 entered into on behalf of REITs or SPV are legal, valid, binding and enforceable by and on behalf of the REIT or SPV. (3) The manager shall ensure that the investments made by the REIT are in accordance with the investment conditions specified in regulation 18 and in accordance with the investment strategy of the REIT. (4) The manager shall undertake management of the REIT assets including lease management, maintenance of the assets, regular structural audits, regular safety audits, etc. either directly or through the appointment and supervision of appropriate agents. (5) The manager, in consultation with trustee, shall appoint the valuer(s), auditor, registrar and transfer agent, merchant banker, custodian and any other intermediary or service provider or agent for managing the assets of the REIT or for offer and listing of its units or any other activity pertaining to the REIT in a timely manner and in accordance with these regulations. (6) The manager shall appoint an auditor for a period of not more than five consecutive years: Provided that the auditor, not being an individual, may be reappointed for a period of another five consecutive years, subject to approval of unit-holders in the annual meeting. (7) The manager shall arrange for adequate insurance coverage for the real estate assets of the REIT: Provided that in case of assets held by SPV, the manager shall ensure that real estate assets are adequately insured. (8) If the REIT invests in under-construction properties as per these regulations, the manager- (a) may undertake the development of the properties, either directly or through the SPV, or appoint any other person for development of such properties; and (b) shall oversee the progress of development, approval status and other aspects of the properties upto its completion. (9) The manager shall ensure that it has adequate infrastructure and sufficient key personnel with adequate experience and qualification to undertake management of the REIT at all times. (10) The manager shall be responsible for,- (a) filing the draft and final offer document with the Board and the designated stock exchange within the specified time period; (b) obtaining in-principle approval from the designated stock exchange; 14

15 (c) dealing with all matters relating to issue and listing of the units of the REIT as specified in Chapter IV. (11) The manager shall ensure that disclosures made in the offer document or any other document as may be specified by the Board contain material, true, correct and adequate disclosures and are in accordance with these regulations and guidelines or circulars issued thereunder. (12) The manager shall declare distributions to the unit holders in accordance with the subregulation (16) of regulation 18. (13) The manager shall ensure adequate and timely redressal of all unit holders' grievances pertaining to activities of the REIT. (14) The manager shall ensure that the disclosures to the unit holders, Board, trustees and designated stock exchange are adequate, timely and in accordance with these regulations and guidelines or circulars issued thereunder. (15) The manager shall provide to the Board and to the designated stock exchanges any such information as may be sought by the Board or the designated stock exchange pertaining to the activities of the REIT. (16) The manager shall ensure that adequate controls are in place to ensure segregation of its activity as manager of the REIT from its other activities. (17) The manager or its associates shall not obtain any commission or rebate or any other remuneration, by whatever name called, arising out of transactions pertaining to the REIT other than as specified in the offer document or any other document as may be specified by the Board for the purpose of issue of units. (18) The manager shall submit to the trustee,- (a) quarterly reports on the activities of the REIT including receipts for all funds received by it and for all payments made, position on compliance with these regulations, specifically including compliance with regulations 18,19 and 20, performance report, status of development of under-construction properties, within thirty days of end of such quarter; (b) valuation reports as required under these regulations within fifteen days of the receipt of the valuation report from the valuer; 15

16 (c) decision to acquire or sell or develop any property or expand existing completed properties along with rationale for the same; (d) details of any action which requires approval from the unit holders as required under the regulations; (e) details of any other material fact including change of its directors, any legal proceedings that may have a significant bearing on the activity of the REIT within seven working days of such action. (19) In case the manager fails to timely submit to the trustee information or reports as specified under sub-regulation (18) of this regulation or sub-regulation (8) of regulation 9, the trustee shall intimate the same to the Board and the Board may take action, as it deems fit. (20) The manager shall coordinate with trustee, as may be necessary, with respect to operations of the REIT. (21) The manager shall ensure that the valuation of the REIT assets is done by the valuer(s) in accordance with regulation 21. (22) The manager shall ensure that computation of NAV of the REIT is based on the valuation done by the valuer and is declared no later than fifteen days from the date of valuation and such computation shall be done and declared not less than once every six months. (23) The manager shall ensure that the audit of accounts of the REIT by the auditor is done not less than twice annually and such report is submitted to the designated stock exchange within forty five days of end of such financial year ending March 31 st and half-year ending on September 30 th. (24) The manager may appoint a custodian in order to provide such custodial services as may be authorised by the trustees and oversee activities of such custodian. (25) The manager shall place, before its board of directors in the case of a company or the governing board in case of an LLP, a report on activity and performance of the REIT every three months. (26) The manager shall designate an employee or director as the compliance officer for monitoring of compliance with these regulations and circulars issued thereunder and intimating the Board in case of any violation. 16

17 (27) The manager shall convene meetings of the unit holders in accordance with regulation 22 and maintain records pertaining to the meetings in accordance with regulation 26. (28) The manager shall ensure the compliance with laws, as may be applicable, of the State or the local body with respect to the activity of the REIT including local building laws. (29) The manager shall ensure that all activities of management of assets of the REIT and activities of the intermediaries or agents or service providers appointed by the manager are in accordance with these regulations and circulars issued thereunder. Rights and responsibilities of sponsor(s). 11. (1) The sponsor(s) shall set up the REIT and appoint the trustee of the REIT. (2) The sponsor(s) shall transfer or undertake to transfer, subject to a binding agreement and adequate disclosures in the initial offer focument, its entire shareholding or interest in the SPV or entire ownership of the real estate assets to the REIT prior to allotment of units of the REIT to the applicants: Provided that this shall not apply to the extent of any mandatory holding of shares or interest in the SPV by the sponsor(s) as required any Act or regulations or circulars or guidelines of government or regulatory authority as specified from time to time. (3) With respect to holding of units in the REIT, the sponsor(s) shall,- (a) hold a minimum of twenty five percent. of the total units of the REIT after initial offer on a post-issue basis: Provided that the minimum sponsor holding specified in this clause shall be held for a period of atleast three years from the date of listing of such units: Provided further that any holding of the sponsor exceeding the minimum holding as specified in this clause, shall be held for a period of atleast one year from the date of listing of such units; (b) together hold not less than fifteen per cent. of the outstanding units of the listed REIT at all times; (c) individually, hold not less than five per cent. of the outstanding units of the listed REIT at all times. 17

18 (4) If the sponsor(s) propose(s) to sell its units below the limit specified in clauses (b) or (c) of sub-regulation (3) of this regulation- (a) such units shall be sold only after a period of three years from the date of listing of the units; (b) prior to sale of such units, the sponsor(s) shall arrange for another person(s) or entity(ies) to act as the re-designated sponsor(s) where the re-designated sponsor shall satisfy the eligibility norms for the sponsor as specified under regulation 3: Provided that such units may also be sold to an existing sponsor; (c) The sponsor/proposed redesignated sponsor shall obtain approval from the unit holders or provide option to exit to the unit holders in accordance with guidelines as may be specified: Provided that this clause shall not apply where the units are proposed to be sold to an existing sponsor. (5) If re-designated sponsor(s) propose(s) to sell its units to any another person, conditions specified under clauses (b), and (c) of sub-regulation (4) shall be complied with. Rights and responsibilities of the valuer. 12. The valuer(s) shall comply with the following conditions at all times- (a) The valuer(s) shall ensure that the valuation of the REIT assets is impartial, true and fair and is in accordance with regulation 21; (b) The valuer(s) shall ensure adequate and robust internal controls to ensure the integrity of its valuation reports; (c) The valuer(s) shall ensure that it has sufficient key personnel with adequate experience and qualification to perform property valuations at all times; (d) The valuer(s) shall ensure that it has sufficient financial resources to enable it to conduct its business effectively and meet its liabilities; (e) The valuer(s) and any of its employees involved in valuing of the assets of the REIT, shall not,- (i) invest in units of the REIT or in the assets being valued; and 18

19 (ii) sell the assets or units of REITs held prior to being appointed as the valuer, till the time such person is designated as valuer of such REIT and not less than six months after ceasing to be valuer of the REIT; (f) The valuer(s) shall conduct the valuation of the REIT assets with transparency and fairness and shall render, at all times, high standards of service, exercise due diligence, ensure proper care and exercise independent professional judgment; (g) The valuer(s) shall act with independence, objectivity and impartiality in performing the valuation; (h) The valuer(s) shall discharge its duties towards the REIT in an efficient and competent manner, utilizing his knowledge, skills and experience in best possible way to complete given assignment; (i) The valuer(s) shall not accept remuneration, in any form, for performing a valuation of the REIT assets from any person other than the REIT or its authorized representative; (j) The valuer(s) shall before accepting any assignment, disclose to the REIT any direct or indirect consideration which the valuer may have in respect of such assignment; (k) The valuer shall disclose to the trustee, any pending business transactions, contracts under negotiation and other arrangements with the manager or any other party whom the REIT is contracting with and any other factors that may interfere with the valuer s ability to give an independent and professional valuation of the property; (l) The valuer(s) shall not make false, misleading or exaggerated claims in order to secure assignments; (m) The valuer(s) shall not provide misleading valuation, either by providing incorrect information or by withholding relevant information; (n) The valuer(s) shall not accept an assignment that includes reporting of the outcome based on predetermined opinions and conclusions required by the REIT; (o) The valuer(s) shall, prior to performing a valuation, acquaint itself with all laws or regulations relevant to such valuation. 19

20 Rights and responsibilities of the auditor. 13. (1) The auditor shall conduct audit of the accounts of the REIT and prepare the audit report based on the accounts examined by him and after taking into account the relevant accounting and auditing standards, as may be specified by the Board. (2) The auditor shall, to the best of his information and knowledge, ensure that the accounts and financial statements, including profit or loss and cash flow for the period and such other matters as may be specified, give a true and fair view of the state of the affairs. (3) The auditor shall have a right of access at all times to the books of accounts and vouchers pertaining to activities of the REIT. (4) The auditor shall have a right to require such information and explanation pertaining to activities of the REIT as he may consider necessary for the performance of his duties as auditor from the employees of REIT or parties to the REIT or SPV or any other person in possession of such information. CHAPTER IV ISSUE AND LISTING OF UNITS Issue and allotment of units. 14. (1) A REIT shall make an initial offer of its units by way of public issue only. (2) No initial offer of units by the REIT shall be made unless,- (a) the REIT is registered with the Board under these regulations; (b) the value of all the assets owned by REIT is not less than five hundred crore rupees; Explanation.- Such value shall mean the value of the specific portion of the holding of REIT in the underlying assets or SPVs; (c) the units proposed to be offered to the public is not less than twenty five per cent. of the total of the outstanding units of the REIT and the units being offered by way of the offer document: 20

21 Provided that for initial offer of value greater than five hundred crore rupees, if prior to the initial offer units of the REIT are held by the public, the units proposed to be offered to the public shall be calculated after reducing such existing units for satisfying the aforesaid percentage requirement; (d) the offer size is not less than two hundred and fifty crore rupees: Provided that the requirement of ownership of assets under clause (b) and size of REIT under clause (d) may be complied with after initial offer subject to a binding agreement with the relevant party(ies) that the requirements shall be fulfilled prior to allotment of units, a declaration to the Board and the designated stock exchanges to that effect and adequate disclosures in this regard in the initial offer document. (3) Any subsequent issue of units by the REIT may be by way of follow-on offer, preferential allotment, qualified institutional placement, rights issue, bonus issue, offer for sale or any other mechanism and in the manner as may be specified by the Board. (4) REIT, through the manager, shall file a draft offer document with the designated stock exchange(s) and the Board, not less than twenty one working days before filing the final offer document with the designated stock exchange. (5) The draft offer document filed with the Board shall be made public, for comments, if any, to be submitted to the Board, within a period of at least ten days, by hosting it on the websites of the Board, designated stock exchanges and merchant bankers associated with the issue. (6) The draft and final offer document shall be accompanied by a due diligence certificate signed by the Manager and lead merchant banker. (7) The Board may communicate its comments to the lead merchant banker and, in the interest of investors, may require the lead merchant banker to carry out such modifications in the draft offer document as it deems fit. (8) The lead merchant banker shall ensure that all comments received from the Board on the draft offer document are suitably taken into account prior to the filing of the offer document with the designated stock exchanges. (9) In case no modifications are suggested by the Board in the draft offer document within twenty one working days from the date of receipt of satisfactory reply from the lead merchant bankers or manager, the REIT may issue the final offer document or follow-on offer document to the public: 21

22 Provided that prior to issue of such final offer document, it shall be filed with the designated stock exchanges and with the Board. (10) The final offer document shall be filed with the designated stock exchanges and the Board not less than five working days before opening of the offer and such filing with the Board shall be accompanied by filing fees as specified under Schedule II. (11) The initial offer or follow-on offer shall be made by the REIT within a period of not more than six months from the date of last issuance of observations by the Board, if any or if no observations have been issued by the Board, within a period of not more than six months from the date of filing of offer document with the designated stock exchanges: Provided that if the initial offer or follow-on offer is not made within the specified time period, a fresh offer document shall be filed. (12) The REIT may invite for subscriptions and allot units to any person, whether resident or foreign: Provided that in case of foreign investors, such investment shall be subject to guidelines as may be specified by Reserve Bank of India and the government from time to time. (13) The application for subscription shall be accompanied by a statement containing the abridged version of the offer document, detailing the risk factors and summary of the terms of issue. (14) Under both the initial offer and follow-on public offer, the REIT shall not accept subscription of an amount less than two lakh rupees from an applicant. (15) Initial offer and follow-on offer shall not be open for subscription for a period of more than thirty days. (16) In case of over-subscriptions, the REIT shall allot units to the applicants on a proportionate basis rounded off to the nearest integer subject to minimum subscription amount per subscriber as specified in sub-regulation (14). (17) The REIT shall allot units or refund application money, as the case may be, within twelve working days from the date of closing of the issue. (18) The REIT shall issue units only in dematerialized form to all the applicants. 22

23 (19) The price of REIT units issued by way of public issue shall be determined through the book building process or any other process in accordance with the circulars or guidelines issued by the Board and in the manner as may be specified by the Board. (20) The REIT shall refund money, - (a) to all applicants in case it fails to collect subscription amount of exceeding seventy five per cent. of the issue size as specified in the initial offer document or follow-on offer document; (b) to applicants to the extent of oversubscription in case the moneys received is in excess of the extent of over-subscription as specified in the initial offer document or follow-on offer document: Provided that right to retain such over subscription cannot exceed twenty five per cent. of the issue size; (c) to all applicants in case the number of subscribers to the initial offer forming part of the public is less than two hundred. (21) If the manager fails to allot, or list the units, or refund the money within the specified time, then the manager shall pay interest to the unit holders at fifteen per cent. per annum, till such allotment/ listing/refund and such interest shall not be recovered in the form of fees or any other form payable to the manager by the REIT. (22) Units may be offered for sale to public,- (a) if such units have been held by the existing unitholders for a period of at least one year prior to the filing of draft offer document with the Board: Provided that the holding period for the equity shares or partnership interest in the SPV against which such units have been received shall be considered for the purpose of calculation of one year period referred in this sub-regulation; (b) subject to other circulars or guidelines as may be specified by the Board in this regard. (23) If the REIT fails to make its initial offer within three years from the date of registration with the Board, it shall surrender its certificate of registration to the Board and cease to operate as a REIT: Provided that the Board, if it deems fit, may extend the period by another one year: 23

24 Provided further that the REIT may later re-apply for registration, if it so desires. (24) The Board may specify by issue of guidelines or circulars any other requirements, as it deems fit, pertaining to issue and allotment of units by a REIT. Offer document and advertisements. 15. (1) The Offer document of the REIT shall contain material, true, correct and adequate disclosures to enable the investors to make an informed decision. (2) Without prejudice to the generality of sub-regulation (1), the offer document shall- (a) include all information as specified in Schedule III to these regulations or as specified in any circulars or guidelines issued by the Board in this regard; (b) not be misleading and not contain any untrue statements or mis-statements; (c) not provide for any guaranteed returns to the investors; (d) include such other disclosures as may be specified by the Board. (3) Any advertisement material relating to any issue of units of the REIT shall not be misleading and shall not contain anything extraneous to the contents of the offer document. (4) If an advertisement contains positive highlights, it shall also contain risk factors with equal importance in all aspects including print size. (5) The advertisements shall be in accordance with the offer document and any circulars or guidelines as may be specified by the Board in this regard. Listing and trading of units. 16. (1) After the initial offer it shall be mandatory for all units of REITs to be listed on a recognized stock exchange having nationwide trading terminals within a period of twelve working days from the date of closure of the offer. (2) The listing of the units of the REIT shall be in accordance with the listing agreement entered into between the REIT and the designated stock exchange. 24

25 (3) The units of the REIT listed in recognized stock exchanges shall be traded, cleared and settled in accordance with the bye-laws of concerned stock exchanges and such conditions as may be specified by the Board. (4) Trading lot for the purpose of trading of units of the REIT shall be one lakh rupees. (5) The REIT shall redeem units only by way of a buy-back or at the time of delisting of units. (6) The units of REIT shall be remain listed on the designated stock exchange unless delisted under regulation 17. (7) The minimum public holding for the units of the listed REIT shall be twenty five per cent. the total number of outstanding units at all times, and the number of unit holders of the REIT forming part of the public shall be two hundred at all times, failing which action may be taken as may be specified by the Board and by the designated stock exchange including delisting of units under regulation 17: Provided that in case of breach of the conditions specified in this sub-regulation, the trustee may provide a period of six months to the manager to rectify the same, failing which the manager shall apply for delisting under Regulation 17. (8) Any person other than the sponsor(s) holding units of the REIT prior to initial offer shall hold the units for a period of not less than one year from the date of listing of the units subject to circulars or guidelines as may be specified by the Board. (9) The Board and designated stock exchanges may specify any other requirements pertaining to listing and trading of units of the REIT by issuance of guidelines or circulars. Delisting of units. 17. (1) The manager shall apply for delisting of units of the REIT to the Board and the designated stock exchanges if,- (a) the public holding falls below the specified limit under sub-regulation (7) of regulation 16; (b) the number of unit holders of the REIT forming part of the public falls below two hundred; 25

26 (c) if there are no projects or assets remaining under the REIT for a period exceeding six months and REIT does not propose to invest in any project in future: Provided that, the period may be extended by further six months, with the approval of unit holders in the manner as specified in regulation 22; (d) the Board or the designated stock exchanges require such delisting for violation of the listing agreement or these regulations or the Act; (e) the sponsor(s) or trustee requests such delisting and such request has been approved by unit holders in accordance with sub-regulation (6) of regulation 22; (f) unit holders apply for such delisting in accordance with regulation 22; (g) the Board or the designated stock exchanges require such delisting for violation of the listing agreement, these regulations or the Act or in the interest of the unit holders. (2) The Board and the designated stock exchanges may consider such application for approval or rejection as may be appropriate in the interest of the unit holders. (3) The Board, instead of requiring delisting of the units, if it deems fit, may provide additional time to the REIT or parties to the REIT to comply with regulations. (4) The Board may reject the application for delisting and take any other action, as it deems fit, under these regulations or the Act for violation of the listing agreement or these regulations or the Act. (5) The procedure for delisting of units of REIT including provision of exit option to the unit holders shall be in accordance with the listing agreement and in accordance with procedure as may be specified by the Board and by the designated stock exchanges from time to time. (6) The Board may require the REIT to wind up and sell its assets in order to redeem units of the unit holders for the purpose of delisting of units and the Board may through circulars or guidelines specify the manner of such winding up or sale. (7) After delisting of its units, the REIT shall surrender its certificate of registration to the Board and shall no longer undertake activity of a REIT: Provided that the REIT and parties to the REIT shall continue to be liable for all their acts of omissions and commissions with respect to activities of the REIT notwithstanding such surrender. 26